Triangular Arbitrage.

Assume the following information:

Quoted Price

Value of Canadian dollar in U.S. dollars $0.45

Value of New Zealand dollar in U.S. dollars $0.15

Value of Canadian dollar in New Zealand dollars NZ$3.10

QUESTION: Given this information, is triangular arbitrage possible? If so, explain the steps that would reflect triangular arbitrage.

a. No, triangular arbitrage is not possible.

b. Yes, triangular arbitrage is possible. Steps are as follows: Obtain Canadian dollars with U.S. dollars, sell the Canadian dollars for New Zealand dollars and then exchange New Zealand dollars for U.S. dollars.

c. Yes, triangular arbitrage is possible. Steps are as follows: Obtain New Zealand dollars with U.S. dollars, sell the New Zealand dollars for Canadian dollars and then exchange Canadian dollars for U.S. dollars.